Travels with Jim follows Jim Huston around the country as he visits with landscapers and helps them understand their numbers to make smarter decisions.
Have you ever noticed how airlines have influenced travelers’ ticket purchases with their frequent-flyer programs? The hotel chains have done the same thing. I’ll often drive 20, 30 or 40 miles out of the way to book a room with my preferred hotel brand.
These last 33 years, I’ve driven well over 1 million miles traveling to and from my clients’ offices. Early in my career, because I was driving and not flying, I realized that I was missing out on all of those frequent-flyer miles and the related travel reward benefits. Not to be outdone, I created my very own frequent-driver program. If I logged 100,000 driver miles, I’d earn a pair of foam dice to hang from my rear-view mirror. Drive 500,000 miles and I’d earn a bobble-head doll to put on the dash of my car.
How it works in the field.
Shortly after the beginning of the new millennium, three different companies with three very different challenges contacted me. Phil, the owner of a $6 million irrigation company, approached me during a break at a seminar at the facility of one of his suppliers. He remarked how I was stressing the importance of building an irrigation service division in a company like his. He then said that his CPA had almost convinced him to get rid of all of his service work and focus on installation jobs in order to build a long-term viable company.
Adam had a $1.2 million weed control company on the East Coast. He had nine technicians in the field but four of the positions constantly saw technicians come and go. Adam wanted to work on an incentive program that would reduce the turnover.
Harry had a $1 million irrigation installation and service company that also offered lawn care and Christmas decor. Every night he was out selling installation jobs to keep his crews busy. He wanted to make a lifestyle change where he could be home more. To do so, he wanted to sell off everything and focus on building his lawn care and Christmas decor business.
The genius idea behind the airline and hotel reward programs is that they tie together short-term, singular purchases of flights and rooms to the accumulation of points. In doing so, they gain long-term repeat customers. Service work such as irrigation service, lawn care, weed control and Christmas decor does the same thing. Not only do you reap the profits from doing the work today, but you also accumulate a book of business that you can sell to a buyer some time down the road.
Contrast the value of such service work with installation work. It certainly has the value of short-term profitability. However, it has little or no long-term viability. It’s a “one-and-done” event, so to speak. Buyers of service companies purchase repetitive income streams or EBITDA.
Where are they now?
Phil didn’t get rid of his irrigation service work, but he did get rid of his CPA. Today his company has more than 50 service technicians around the country. He’s created a very viable company that generates both short and long-term value.
Adam implemented an incentive program that has been very effective. He has all but eliminated turnover. He reminded me not long ago that zero turnover isn’t always a good thing. Sometimes you want some people to turn over. In addition to lower turnover, productivity is up and so is morale. He has almost quadrupled his company’s volume and the future looks bright.
Harry sold the irrigation installation and service part of his business. He’s totally replaced its revenue with lawn care and Christmas decor sales. Better yet, his lifestyle has totally changed. Instead of having to sell two to three irrigation installation jobs a week to keep his crews busy, he has the luxury of focusing on long-term strategic threats and opportunities – from home. The value of his business has also increased dramatically. Ten years ago, he could have sold it for $300,000 to $350,000. Today it’s worth over $1-million.
If you’d like to sign up for my frequent driver program, send me a check for $500. I’ll even throw in one of those dancing Hawaiian bobble-head dolls for free. Or you might use your resources to build the service side of your business. Too many green industry contractors don’t take the time to study the value of repetitive service work. Be smart and build that part of your business.